RE: Option Trade

here's the file we spoke about

-----Original Message-----
From: Griffith, John
Sent: Wednesday, June 13, 2001 2:10 PM
To: Parkhill, Kenneth
Cc: Issler, Paulo; Lee, Bob
Subject: Option Trade

Kenneth,

Here is the trade I was looking at:

Dec'01 trading at $4.725

100 4.70 Calls
-300 5.50 Calls
200 5.90 Calls

-200 3.50 Puts
300 4.00 Puts
-100 4.70 Puts

Someone called a broker on the floor of the exchange to get a price on this butterfly combination. First of all, can you tell me what this trade does for you. I looked at the payout and I don't understand what they were trying to do. Second, the price that the floor market makers gave him was $.10 bid at $.14. I price the deal at approximately $.07. I know that the $.10 is too high and the delta of the trade is about .07 (really small). How can I use your skew file to see the arbitrage?

I have attached the payout chart.

Thanks for your help. Call if you have any questions. Thanks.

John

<< File: Payout chart.xls <<